Myntra Seeks Listing; Rules Out Alliances

Privately held Indian online retailer Myntra Designs Pvt. Ltd. aims to list on the local stock exchanges by 2016 in an effort to retain its independence, even as global giants vie for local partnerships to tap into one of the fastest growing e-commerce markets in the world.

India has leap-frogged Brazil and Russia to become the fifth largest e-commerce market in the world, behind China, Japan, Germany and the U.S., market research firm ComScore says. It had 139 million Internet users, and 44 million online retail visitors at the end of December 2012, numbers that have led global online retailing giants like Amazon and eBay to step up their investment in the country.

In June, eBay, which has been in India since 2004, led a $50 million investment in local online retailer Snapdeal, while Amazon went solo in the country last month, selling books as well as movies and television shows. Amazon first entered India last year through price comparison website Junglee.com.

Myntra, which retails clothes, footwear and accessories on Myntra.com, was set up in 2007 and is now the third-largest online retailer in India after market leader Jabong, and Flipkart and Amazon — both of which share second place — according to ComScore.

Myntra is also among the few top online retailers in India that follow a high-cost business model, under which the company buys its inventory to sell to consumers. Some of its peers such as Flipkart and Jabong are shifting to a low-cost marketplace model, where retailers use the online platform to sell brands to customers directly.

Mukesh Bansal, 37, founder and chief executive of Myntra, recently spoke to The Wall Street Journal about why he doesn’t want to partner with global players and the perils of the low-cost, or marketplace, business model.

Edited excerpts.

The Wall Street Journal: Are you seeking partnerships with any of the global players that have recently entered India?

Mukesh Bansal: We are not looking for any strategic tie-up with global players in the next couple of years. That’s something we can consider later, if it makes sense. A global player will not invest unless it has the intention of buying or merging. We don’t want to commit to that future.

WSJ: What are Myntra’s future plans?

Mr. Bansal: We want to be the largest player and eventually go public. We would like to list on the exchanges some time in 2015 or 2016. As a public company, you can chart your own course and destiny, and thus we don’t want to partner with any global players.

WSJ: When do you expect to be profitable and what kind of revenue growth are you looking at?

Mr. Bansal: We have been breaking even operationally for a while. We will be profitable across the board by the middle of next year. We expect our revenue in the current fiscal year to double to 8 billion rupees ($133.2 million).

WSJ: Are you looking to raise more money?

Mr. Bansal: We don’t plan to raise any money in the next 12 to 15 months. We have so far raised about $75 million from four partners– Tiger Global, Accel Partners, IDG Ventures and Kalaari Capital. We have more than enough cash to get to profitability at this point. Once we reach profitability, we may consider raising more funds to drive long-term growth

WSJ: Why are you wary of moving to a marketplace model even as most of your competitors have started shifting to that?

Mr. Bansal: We think the customer experience is extremely important as the online e-commerce sector in India is still being established. When we have inventory with us, we are able to ship within a few hours. In a marketplace model, there is always uncertainty about the availability of inventory. That’s not a great experience for customers. A lot of consumers are trying online shopping for the first time in India. The speed of delivery helps build trust with the consumer. We want to move into the marketplace model when e-commerce is much more stabilized and when the trust factor is very high.

WSJ: Will you shift to a marketplace model in the long run?

Mr. Bansal: Most transactions in India today are based on an inventory-based model. Some players are making the bet that the marketplace model will give them long-term scale. Both are proven models. Amazon is the largest online retailer in the world. Nearly two-thirds of its business comes from the inventory model. In the long term, 80% of our business will be based on the inventory model and the rest on the marketplace model.

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